Coming to Terms with Reality. Evaluation of the Belgian Debt Relief ...

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Annexes
3 Debt Relief under the HIPC Initiative.
3.1 The Decision Point
In the fall 1996 the creditor community had adopted the Highly Indebted Poor Country
(HIPC) Initiative. Cameroun was not eligible under this initiative because the country had
a ratio of net present value of debt to exports lower than the 250% threshold. Moreover
Cameroun lacked a proper record of successful implementation of IMF-supported
programmes, had not used all traditional debt treatments (especially in the framework of
the Paris Club). But when in 1999 the NPV of debt/export threshold was lowered to 150%,
in the framework of the Enhanced HIPC Initiative, Cameroon satisfied the NPV of debt/
export condition. In October 2000 the IMF and the International Development Association
decided that Cameroun had satisfied the criteria to reach the Decision Point under the
Enhanced HIPC Initiative.
The IMF and IDA stated that Cameroon had made “substantial progress in implementing
an economic reform program” supported by the Fund under the Poverty Reduction and
Growth Facility (PRGF) and IDA’s third Structural Adjustment Credit (SAC III). The two
institutions observed that the macroeconomic performance had improved markedly and
that important structural reforms had been launched, including privatizations in the public
enterprise sector and the liberalization of the energy and transport sectors(see box 3.1).
Cameroon was also drawing up sectoral strategies for the health (including AIDS/HIV) and
education sectors and had prepared an interim Poverty Reduction Strategy Plan (I-PRSP).
Finally a governance and anti-corruption strategy was adopted with an associated action
plan.
In June 1999 Cameroon’s ratio of external debt (in NPV terms) to export revenues was
205% (after treatment under Paris Club Naples terms). Extra relief through the HIPC
Initiative was to reduce the debt stock (in NPV terms) to 150% of exports. Accordingly the
amount of debt reduction to be given in the years after the Decision Point was set at 2,000
million US$ in nominal value (or 1,267 million US$ in 1999 NPV terms). The
corresponding common reduction factor was approximately 27%. Based on proportional
burden-sharing, bilateral creditors, mainly the countries members of the Paris Club, were
to provide almost 70% of the total debt reduction (see table 2). The shares of multilateral
and of private creditors were respectively 25.5% and 5.1%. These figures for debt
reduction covered both operations during the interim period between the Decision and the
Completion Point and debt reduction upon attainment of the latter.
Coming to Terms with Reality
Box 3.1 Key reforms and objectives to be monitored before the Decision Point:
Area Measures Status
PRGF program Completion of current program Satisfactory.
Structural Adjustment Continued satisfactory and timely Privatization and forestry broadly
Credit III
execution.
satisfactory; transport marginally
satisfactory; three of six tranches
released.
Governance Adoption of governance and National governance program
anti-corruption strategy.
adopted.
Modification of procurement
code.
Done.
Education and health Adoption of education and health Education: sector strategy judged
strategies; progress w.r.t. key acceptable;
milestones.
Health: sector strategy judged
acceptable.
HIV/AIDS Satisfactory progress toward National HIV/AIDS strategy and
implementation of HIV/AIDS
actions.
emergency action plan prepared.
Use of HIPC resources Establishment of arrangements Priority sectors identified. Set of
for the effective use and
budgetary programs and projects
monitoring of savings under the is being prepared. Special
enhanced HIPC during interim Treasury account at the Central
period.
Bank. Expenditures to be
recorded in the budget with
specific code. Monitoring by
special committee.
Source: Preliminary HIPC documents (IDA/R2000-96 and IMF/EBS/00/91 and staff assessment.
Table 2 Debt reduction under the HIPC:
Creditors
Absolute amount in 1999 NPV
terms (million US$)
Share of total reduction
(%)
World Bank Group 176 13.9%
IMF 37 2.9%
African Development Bank Group 79 6.2%
Other multilateral (EU etc.) 31 2.5%
Bilateral (of which: Paris Club) 879 (866) 69.4% (68.4%)
Commercial 65 5.1%
Total 1267 100%
Source: IMF, Decision Point Document
3.2 The Interim Period
During the interim period, Cameroon benefited from debt forgiveness by Paris Club
members and by multilateral institutions for a total amount of 201 million US$ (in present
value terms).
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